French Finance Minister Christine Lagarde wants the EU to create a single access point for trading shares of young, high-growth businesses and has proposed a range of measures to encourage innovative companies to list on European stock exchanges.
Lagarde is also keen to simplify market obligations for small, medium and intermediate companies, allowing them more time to publish quarterly reports, ease accounting standards and produce less detailed prospectuses when listing on stock markets.
"There are many things we disagree about but there is hardly ever disagreement on the importance of small businesses as drivers for growth, employment and R&D," she told a meeting in Brussels, hosted by the European Capital Markets Institute (ECMI).
The proposal for a joint EU system for trading shares in innovative companies is contained in a report by Fabrice Demarigny, a capital markets expert, who produced a a detailed plan for Lagarde which she published last week (18 March).
The new system would make it easier for investors to access smaller "secondary" markets across Europe like the London Alternative Investment Market (AIM), most of which specialise in high-tech stocks. Listing functions and revenues would remain at national level and trading revenues would be shared by the joint owners of the platform.
The joint trading platform would be licensed and supervised directly by the European Securities Markets Authority (ESMA). Lagarde said the move would form part of a series of measures which, if adopted on an EU basis, would help small companies rapidly grow into bigger players.
Lagarde: Make life easier for publicly listed SMEs
She said a single definition of small listed companies was needed but that this should be broader than the definition of SMEs currently used in EU legislation.
The French minister said the term 'Small and Medium-sized Issuers Listed in Europe' (SMILEs) would be more appropriate and that any company meeting the definition should be subject to less demanding market obligations.
This would include using a simplified, harmonised prospectus – a key document outlining a company's business plan – before listing on a stock exchange. SMILEs would also have three months to prepare quarterly accounting, rather than the two months currently required of all publicly-listed firms.
A more "proportionate" level of regulation and accounting standards is at the heart of Lagarde's vision for encouraging high-growth companies to issue IPOs.
Lagarde said she hoped Demarigny's report would inspire the Commission to take a serious look at proposals to make it easier for smaller companies to list on stock exchanges.
She said several EU directives are currently under review and this would be an ideal time to rethink the rules under which smaller companies access capital markets.
The report was broadly welcomed by investors, although some expressed concerns that lowering the bar on accounting rules could hamper the flow of information to the market.